About Australia

Below you will find a quick overview of important facts about living and working in Australia. We have not covered general information on tourist destinations, climate and geography here as there are many excellent and comprehensive sources of information on this on the Internet. The following information is aimed primarily at people who want to work and live in Australia.

Overview

Breathtaking landscapes, vibrant cities, stunning flora and fauna – Australia has it all, attracting millions of tourists every year. But Australia is also a country with a dynamic economy that has not suffered a recession for more than 25 years. While the US and Europe suffered the so-called “new economy” crash during the early 2000s, and a slump in economic growth since 2008 as a result of the financial crisis, the Australian economy has continued to grow impressively. Today, with a gross domestic product per capita of around US$52,000.- the country ranks 11th in the world. For comparison: Germany comes in 16th place with a gross domestic product per capita of about US$42,000.-

However, Australia is not only one of the most prosperous countries in the world in terms of economic size. In the UN’s World Happiness Report, Australia regularly ranks in the top ten. In the “World’s Most Liveable Cities” ranking by the prestigious British The Economist magazine, Australia’s second-largest city, Melbourne, has held first place for seven consecutive years. Adelaide and Perth, two other major Australian cities, also feature among the top 10. The Economist’s “Safe City Index” ranks both Melbourne and Sydney among the top 10 out of 60 large cities worldwide. Few other countries in the world manage to do so well in all categories (prosperity, quality of life, and safety). For good reason, therefore, Australia comes in second place behind Norway in the UN’s World Development Index, which combines a variety of different criteria.

With this in mind, it is no wonder that Australia attracts more immigrants and workers from around the world every year. The Australian population grows by 300,000 to 500,000 people annually, mainly due to the high number of people who immigrate Down Under every year.

The Australian population

Australia currently counts about 25 million inhabitants, with the population growing by five million people in about 10 years. Forecasts indicate a further population growth of up to 40 million inhabitants by 2050. This growth will be driven above all by the immigration of skilled professionals. Over a quarter of the Australian population were not born in Australia, and one in two Australians has at least one parent who migrated to Australia. The overwhelming majority of Australians live in the cities along the coasts; Sydney and Melbourne alone are home to 40% of the total population, whereas the interior of the country is sparsely populated.

The Australian labour market

The dynamic development of the Australian economy over the recent decades has led to a steady increase in the Australian workforce. The unemployment rate in Australia is currently around 5.5%, but at the same time there is a noticeable shortage of skilled workers in many occupations and industries. The Australian answer to this skills shortage is a visa system which recognises labour market needs, thus qualifications and work experience. There are currently around 12 million employed people in Australia, and the Australian Government forecasts that the number of jobs in the Australian labour market will increase by an average of 1.6% per year over the coming years. This growth will particularly stem from new jobs requiring either a degree or a vocational-training qualification.

The Australian working week is 38 hours for a full-time position. Australia currently has a statutory minimum wage of A$18.29 per hour.

Healthcare system

The Australian healthcare system is a mixture of public and private in terms of insurance and healthcare services. All Australian citizens and permanent residents are insured under the tax-funded Medicare system. Medicare covers a significant part of the costs incurred. In some cases, Australian doctors charge a fee above the reimbursement rate covered by Medicare, in which case the shortfall must be paid by the patient or by an additional private health insurance. Treatment in public hospitals is fully covered by Medicare, but private hospitals may require substantial co-payments. Private health insurance covers expenses that exceed Medicare reimbursements and services which are not covered by Medicare (for example, dentistry or ambulance services). There are also tax incentives for those with private health insurance in addition to Medicare.

Persons who are not Australian citizens or Australian permanent residents usually need a private health insurance for all healthcare-related services. Requirements vary depending on the visa class. Furthermore, some countries have reciprocal healthcare agreements in place with Australia, through which citizens and visitors from these countries are automatically covered by Medicare for specified services when they are in Australia.

The following countries have reciprocal healthcare agreements in place: Belgium, Finland, Italy, Malta, Netherlands, New Zealand, Norway, Ireland, Slovenia, Sweden, United Kingdom
If you are a citizen of one of these countries, please check the respective agreement between Australia and your country regarding conditions and coverage.

Tax system

The two most important taxes are income tax and goods and service tax (GST).

As in most countries, the Australian tax system is complex and includes a variety of exceptional and special rules. The following overview is intended only as a brief summary. For more information, visit the Australian Tax Office (ATO) website.

The GST is a tax – currently 10% – on most goods, services, and other items sold or consumed in Australia.

Income tax is progressive. This means that the tax rate increases in line with income. The Australian tax year is different from the calendar year, starting on 1 July and ending on 30 June of the following year.

The following table shows the income tax and marginal tax rates for the tax year 2018/2019 in relation to income.

Tax rates

Taxable Income

Tax on this income

0 – $18.200

no tax

$18.201 – $37.000

19c for each $1 over $18,200

$37.001 – $90.000

$3,572 plus 32.5c for each $1 over $37,000

$90.001 – $180.000

$20,797 plus 37c for each $1 over $90,000

$180.001 und mehr

$54,097 plus 45c for each $1 over $180,000

This table shows the tax rates for people who are Australian residents for tax purposes. Individuals who work and live in Australia for long periods or as a permanent residents usually fall into this category. Permanent residents of Australia are normally taxed in Australia on their total worldwide income. If you hold a temporary visa for Australia, you may only be taxed on your Australian income. Foreign residents do not fall under the definition of an Australian resident for tax purposes, and different tax rates apply for them, starting with a tax rate of 32.5% for an income of up to A$90,000.- For the part of income above this amount, the standard tax rates of 37% and 45%, as shown above, apply. Special tax rates apply for working holiday makers, regardless of their residency for tax purposes:

Tax rates for Working Holiday visa holders

Taxable Income

Tax on this income

$0 – $37.000

15c for each $1

$37.001 – $90.000

$5,550 plus 32.5c for each $1 over $37,000

$90.001 – $180.000

$22,775 plus 37c for each $1 over $90,000

$180.001 und mehr

$56,075 plus 45c for each $1 over $180,000

Taxpayers covered by Medicare – i.e., Australian citizens and permanent residents – pay an additional Medicare Levy of 2% of their taxable income. Exemptions exist for individuals with low incomes. On the other hand, taxpayers with an income above a certain threshold and who do not have appropriate private health insurance must pay an additional Medicare levy surcharge.
Investment income, such as interest, dividends, and rent, is added to taxable income and taxed as part of total income in accordance with the applicable tax rate. In the case of dividends received from Australian companies, some dividend recipients will receive a franking credit which entitles them to a franking credit offset. This franking credit represents the amount of taxes already paid by the companies on their profits.
Capital gains – i.e., profits from the sale of assets, such as shares, real estate, etc. – are usually imputed only with 50% to the taxable income. The other 50% remains tax-free. The condition is that these assets have been owned by the taxpayer for more than 12 months. A number of special rules exist; for example, for a taxpayer’s main residence, and for the sale of assets related to a small business.
In Australia, with the exception of the Medicare levy, no social security contributions are levied in addition to income tax, as social benefits are typically funded from general tax revenue. Superannuation contributions, described in the section on the Australian Pension Scheme below, are generally completely covered by the employer.

Tax for businesses

The taxation of companies depends on the legal form as well as the size of the company. Sole traders and partnerships are taxed at the level of the individuals’ respective personal tax rates. The current corporation tax rate for corporate entities is 30%, which is reduced to 27.5% for companies with less than A$20 million in annual revenue. Small businesses also enjoy additional tax benefits (for example, an immediate write-off of fixed assets up to a value of A$20,000.-).
The individual Australian states levy a payroll tax on companies, based on the wages paid by these companies. The amount varies from state to state. There are also exemptions, with small businesses often excluded from this tax. Additional state and territory taxes and stamp duties are payable on the value of real estate and real estate transactions.

International tax agreements

The international tax agreements are especially important for migrants and expats in Australia who receive an income from their home country. To avoid double taxation of income, Australia maintains tax treaties and double-taxation agreements with a number of states. For this purpose, these agreements define which income is taxable in which country or how taxes paid in one country can be offset from tax liabilities in the other country.
To find out whether your home country has a tax agreement with Australia, see the current list of income tax treaties, which can be found on the ATO website.

Pension system

The Australian pension system is based on three pillars: a tax-funded Age Pension, superannuation, a compulsory funded pension scheme, and additional private savings.

The tax-financed Age Pension is means-tested; i.e., it is only paid if the retiree’s total income does not exceed a certain amount and the total value of the retiree’s assets does not exceed a certain threshold. The maximum annual Age Pension is currently A$23,598.- for singles and A$35,573.- for couples.

The largest and most important pillar of the Australian pension system is superannuation. This is a fully funded pension system. Australian workers can choose from a variety of superannuation funds that follow different investment strategies. All employers are required to pay an amount equal to at least 9.5% of gross salary into the employee-nominated fund. This contribution rate is to be gradually raised to 12% in the coming years.

There is no mandatory employee contribution, but employees can voluntarily make additional contributions.

The superannuation contributions made by the employer are not added to the employee’s taxable income, but are taxed at the level of the fund at a flat rate of only 15%. The payment of pensions from these funds is usually tax-free during the pension phase. Australians are free to choose when they want to retire and start receiving pensions from their pension fund. The only condition is that a minimum age, dependent on the year of birth, is exceeded. For those born after 1.7.1964, this minimum age is 60. If you leave Australia permanently, you can withdraw the savings from your personal superannuation fund early.

When moving to Australia as a migrant or temporary visa holder, it is advisable to check the situation regarding your Age Pension claims from the countries you have worked and lived in before.

If you have worked in Australia and your employer paid super contribution on your behalf into your super funds, you can apply to have this super paid out to you as a departing Australia superannuation payment (DASP) when you leave. Some conditions apply (e.g., that your visa must have expired).

Australian superannuation funds currently manage over A$2 trillion in wealth to fund the pensions of the Australian population.

Doing business in Australia

The process for starting a business in Australia is simple and straightforward compared to that in many other countries. If you want to be entrepreneurial as a sole trader, you only need an Australian Business Number (ABN) and a Tax File Number (TFN). The application for an ABN can be made online for free within minutes. The same applies to the TFN, which for sole traders is their ordinary individual TFN. Those who do not want to do business under their personal name can also register a business name for A$35.-, of course also online.

Setting up a partnership with several business partners is similarly uncomplicated. However, a partnership is not itself a legal entity, rather a structure in which the individual partners conduct a common business and distribute income or losses between themselves. Furthermore, all partners have unlimited liability for obligations under the partnership.

Founding a company as a separate legal entity is also straightforward and requires no minimum capital contribution. The most common form of company is the proprietary limited company (Pty Ltd). Under this business structure, the number of shareholders (not including employees of the company) is limited to a maximum of 50. A company with more than 50 external shareholders is classified as public. The liability of the company’s shareholders is limited to the value of shares. The shareholders are liable only in terms of their capital contributions and not their private assets. A Pty Ltd company is managed by its directors, as appointed by the shareholders. At least one director must be resident in Australia. The registration fees for a proprietary company amount to a few hundred Australian dollars. The registration itself can be carried out online within a few hours. In addition, there are a number of other legal forms such as trusts, which can be considered an appropriate legal structure.

If you are planning to start a business in Australia as a migrant or to set up a subsidiary in Australia, please contact us. In addition to migration agents, we have qualified accountants, so Visapath Australia can provide comprehensive, expert advice from a single source. If required, we can also put you in touch with qualified advisors in other fields for your project.

Overall, Australian corporate and tax law is very founder-friendly and facilitating for small businesses. As an Australian permanent resident with working rights, you have no limitations regarding founding, owning, and managing your own business and company. In addition, special visa classes exist for experienced business persons, founders, and investors, which encompass the required residence and working rights for your project. Talk to us and tell us about your project.

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